John Lewis Enters The London Market
Following the conclusion of a £500 million joint venture with investment firm Abrdn, John Lewis will enter the London real estate market.
Overview of the Plan
A thousand new rental houses are expected to be delivered as a result of the multi-decade agreement across three local communities, including two in London. The alliance hopes to construct 10,000 additional houses over the next ten years, so the move fits into that plan. By the end of this decade, the company stated that it hoped to generate about 40% of its profit from sources other than retail.
JLP estimated that almost half of the 10,000 homes it intends to construct will be built on properties it already owns but needs to repurpose.
Subject to obtaining necessary permits, John Lewis intends to renovate Waitrose stores in Greater London’s Bromley and West Ealing to create new residences and better shops, while a defunct John Lewis warehouse in Reading would be turned into residences.
According to John Lewis, the sites, which have a combined area of 78,000 square feet, were picked for their strategic locations and closeness to transportation hubs. A spokeswoman told the Standard that the exact number of dwellings to be constructed on each site has not yet been decided.
The John Lewis Cooperation’s Nina Bhatia, Executive Director for Strategy and Commercial Development, said: “Our partnership with abrdn is a critical step toward our goal of building much-needed high-quality residential accommodation in our communities.
“Our residents can expect homes furnished by John Lewis with first-rate service and facilities. The move underlines our commitment to build on the strength of our brands to diversify beyond retail into areas where trust really matters.”
The company’s decision to enter the rental sector is a part of its increased efforts to diversify its revenue streams as it struggles with constrained profit margins and declining foot traffic throughout its expansive retail estate. It happened after John Lewis, which made a £26 million pre-tax deficit in the year to end January, closed sixteen of its stores during the epidemic and let over 1,000 employees go to cut expenses.
Hargreaves Lansdown analyst Sophie Lund-Yates said John Lewis’s “large physical estate means a structural decline in footfall is a problem.”
“The group has some enviable plots in its repertoire, with their central locations likely to make them attractive to renters. Grasping the nettle is an admirable move and rent collection should be a stable source of income, but the fact it has come to this speaks volumes.”
It comes after figures from estate company Foxtons this week showed a 22% increase in rent prices in the capital since the start of the year, with average rates hitting a record £571 per week amid an increase in inquiries and a spike in bidding wars between Londoners competing to find a place to live.
The increase in rents came despite reports that last month, property prices dropped at their sharpest rate since the pandemic’s height.
The largest building society in Britain According to Nationwide, November saw the biggest monthly decline in home prices since June 2020, a 1.4% reduction in average home prices in the UK.
Neil Slater, head of real assets at Abrdn, said: “The critical lack of quality rental accommodation in the UK needs to be addressed, so we are delighted to partner with the John Lewis Partnership to provide the required institutional investment. The ambitions and responsible ethos of our brands both strongly align, and our partnership should offer investors long-term returns and give residents confidence in a top-quality living experience.”